Overcoming Omnichannel Challenges to Build Stronger Partnerships
Table of Contents Executive Summary
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Strategies Employed by Best-in-Class Retailers and Suppliers
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Key Challenges for Retailers and Suppliers in an Omnichannel Environment
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Evolving Consumer Expectations and Shopping Behaviors
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Changing Channel Landscape and Growing Competition
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Internal Challenges for Retailers and Suppliers
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Strategies Employed by Retailers and Suppliers
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Planning and Future Visioning
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Investing for Mutual Success
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Seamless Integration End to End
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Building and Sharing Knowledge Together
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Increasing Flexibility and Speed
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Focusing on the Shopper Experience
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Conclusion
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Executive Summary This research examines the key challenges faced by retailers and suppliers in the growing omnichannel environment. As retailers and suppliers make efforts to improve cross-channel offerings and better integrate their online and in-store experiences and product offerings, Advantage Report™ USA sought to better understand their challenges and the actions required to overcome them, as well as understand consumer demands in an omnichannel environment. This report was compiled based on feedback from ~500 cross functional retailer and supplier participants within Advantage Report™ USA. Respondents from 49 retailers and 59 suppliers were interviewed on the following topics: • Biggest challenges faced by retailers and suppliers in an omnichannel world • How best-in-class retailers and suppliers are working together to overcome these challenges Based on the 2017 USA Advantage Report™ Supplier and Advantage Report™ Retailer
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Strategies Employed by Best-in-Class Retailers and Suppliers Our research shows that best-in-class companies employ the following strategies to strengthen partnerships in this fast-paced environment: Planning and future visioning Best-in-class companies are strategic and forward-thinking. They allocate the appropriate resources against all areas of their business. Companies that are successful in an omnichannel environment are able to connect the many pieces and form an omnichannel strategy and cohesive plan. They plan ahead and often involve their partners in the strategic process.
Seamless integration and cohesiveness end to end Successful omnichannel companies break down internal silos and integrate their business across all channel types to work as a whole. This enables them to have consistent messaging about their stores or products across all channels.
Investing for mutual success Best-in-class companies collaborate with their retailer or supplier partners. They recognize that investing with their partners and testing and learning together will advance them further than if they were to do it solo. Retailers and suppliers look for ways to differentiate across multiple channels. They are proactive by bringing opportunities and solutions to the table and work together to implement them managing pricing and margins to remain competitive.
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Building and sharing knowledge together Top companies listen to consumers, invest in data and insights, and stay on top of trends and consumer buying habits. They share their knowledge with their retailer and supplier partners.
Top retailers and suppliers provide the right products and product assortment for the right channels and ensure stock availability to meet consumer demands.
Increasing flexibility and speed Not surprisingly, the ability to be flexible and nimble sets best-in-class companies apart from and ahead of other suppliers and in particular, helps them compete with newer small to medium sized or ‘boutique’ companies structured for online business. An organization that is able to make swift decisions, and rapid shifts to stay in step with latest trends is a must in the new world. Focusing on the shopper experience Best-in-class companies provide an ideal shopping experience for consumers by providing what they want, when they want it, where they want it, and how they want it, all in an easy-to-shop environment.
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Key Challenges for Retailers and Suppliers in an Omnichannel Environment
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Evolving Consumer Expectations and Shopping Behaviors Change abounds. It is not new news that consumer shopping behaviors are changing as are their expectations within a changing retail landscape. Therefore, companies today are faced with the challenge of understanding and meeting the needs of a diverse set of consumers, from boomers to millennials and everything in between. There is no one-size fits all approach that will work with today’s consumers. Instead there is a demand for a ‘just for me’ strategy today.
A US retailer elaborates, “We are trying to develop a plan that will engage everybody but we cannot. That is the biggest problem, trying to find plans that will work for multiple levels of shoppers. Millennials like to order online. For them it is the digital coupon, not that paper coupon that we used to run in our circular. It is trying to figure out that right mix of what to go after.”
There has been a reduction of traffic in brick-and-mortar stores driven by a surge in online shopping. Channel blurring is prevalent. A grocery store is not just a grocery store anymore. For example, grocery stores are moving into the convenience channel by adding convenience stores with gas stations out front. To survive, retailers and suppliers are offering products through several channels, from conventional brick-and mortar to newer channels like online.
Targeting and effectively marketing to these different consumers across multiple channels is problematic. Getting the right assortment, at the right price, in the right channel is a challenge for retailers and suppliers alike.
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Changing Channel Landscape and Growing Competition E-commerce has opened the doors to many new supplier and retailer entrants and competition has exploded. Online shopping offers consumers the convenience of shopping from the comfort of their own homes and often offers consumers a value that is difficult to beat. Pricing online is aggressive and it is easier for consumers to shop for the best price online and shipping is often free. Retailers with a virtual aisle usually have lower capital expenses generating savings that can be passed on to consumers. Making sure they have a price that is competitive is imperative to remaining viable. Because consumers have so many options to choose from, and because it is more convenient than ever to do so, they often shop multiple channels and make smaller shopping trips at each stop. Store and brand loyalty is declining. This makes it increasingly important for retailers and suppliers to find ways to differentiate themselves and earn loyalty. What is going to make consumers return to their stores, virtual or traditional, and buy their products again? Understanding millennials, and how to stay relevant and on-trend with them, is of critical importance because they are the driving force behind the growth of e-commerce.
“Some of the biggest challenges are being able to offer differentiation, either by channel or by retail. In an omni-world ... it is difficult to give a retailer a way to stand out. The major online retailers eliminate the need for a consumer to go to a place to get something. They can get it from anywhere. It is challenging when we want to create a destination for consumers and help retailers create a destination for our brands,� states a supplier from the US.
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Retailers who have strength in brick-and-mortar stores are being threatened by the multitude of relatively new online sellers at a time when driving repeat purchase in their stores is critical. Large suppliers, in particular, big CPGs, find themselves competing with smaller, nimbler and entrepreneurial suppliers who are typically more conversant online and innovate with relevant and trendy items and new ways of communicating with consumers. As consumers gravitate to online shopping, marketing vehicles have shifted with it. More traditional marketing vehicles like TV and radio are making way for newer methods like online ads and other digital content that attracts these tech savvy and environmentally conscious consumer.
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Many suppliers have products in categories that do not lend themselves to selling as well online as in-store. For example, both suppliers and retailers mention how difficult it is to sell impulse items online and are trying to find ways to create a disruptive environment that prompts purchase. Products with short shelf lives or those that need to be temperature controlled, frozen or chilled, also prove to be a challenge. Smaller, more nimble companies often have the advantage of being more flexible, giving them the opportunity to pivot and change more quickly. Everything is moving so fast that trying to stay ahead of it is difficult. The speed with which things are changing in this environment, and the agility required to change, has proven to be problematic for many. Many fear that they are falling behind in expanding to online and they feel pressure to do so. They recognize that it is where the future is headed and that they must enter to stay relevant. It is an adapt-or-die situation.
The biggest challenge our company faces in an omnichannel world is to try to stay ahead of it. Everything moves so fast,� a US retailer explains. “We think we have something pulled together and we really do not. It is not that we do not, it is just that it changed before we even got there. The consumer buying patterns are changing quickly,� this US retailer concludes.
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Internal Challenges for Retailers and Suppliers Many companies are struggling internally with how to become successful in an omnichannel environment. Understanding how to manage resources across brick-andmortar and online businesses is challenging. Some companies point out that there is a lack of data and metrics available for online business performance, which contributes to the difficulty in determining how best to move forward. Suppliers think that many retailers may not have an overall omnichannel strategy or that they are not effectively communicating it or involving them in it. They are concerned that these retailers are playing “hit and miss” or are being reactive rather than proactively creating a long-term vision and strategy. For many the path to profitability is unknown and the return-on-investment is unclear.
“It is hard to capture how much business is going to online. There is no metric for it at this point. It is a lot greater than anyone can say or think. That is the challenge.” The US retailer continues, “We do not even know how to understand the business model. It is not even captured through data bases like Nielsen or IRI, etc.”
The requirement for sufficient financial and people resources dedicated to the omnichannel, and the lack of existing resources, can deter retailers and suppliers from keeping up. Often there are too few people resources put against the online business and there is also a lack of necessary skills within their companies. Because it is a relatively new channel, it is difficult for companies to find experienced and qualified staff to hire into these positions.
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Often there is a lack of integration and communication between on and offline personnel and/or departments within companies. For example, the people responsible for marketing or supply chain servicing traditional channels may be different than those accountable for marketing and logistics online. To add complexity, some roles focus on only one channel and others focus on both online and traditional channels. This makes it difficult to align and offer a cohesive, seamless approach across channels. Systems, too, are often not in sync or linked together, making it more cumbersome and less efficient than it
should be. Beyond this, the technology used to service this newer channel is sometimes old and outdated creating compatibility issues which emphasizes the requirement for investment in modern technology and tools to succeed.
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From a supply-chain perspective, where there has traditionally been one path for product to the store, there is now a need to have multiple paths to the store and to the consumer. There are often unique requirements for online around product type, packaging and distribution. Order fulfillment in an online environment can be challenging. Since this is a newer channel, demand is usually lower than for conventional outlets. Therefore, more individual items, rather than full cases of product, are shipped. Different packaging solutions, like larger or smaller sizes, may be required to sell the product online. For some retailers and suppliers, product weight is an obstacle, as the cost
to ship to consumers is prohibitive. In an effort to keep online prices competitive, companies are faced with trying to minimize costs and looking for ways to make the end-to-end process more efficient. From a marketing standpoint getting the right content online is imperative to attract and retain consumers. At a minimum, suppliers need to provide accurate, detailed and up-to-date product information for consumers. Retailers need to ensure that the online shopping experience is easily accessible and maneuverable for consumers.
A US retailer says, “One of the difficulties we have is ensuring everyone in the different channels is aligned. We have different departments that deal with different areas of the business. It is difficult when there are lots of moving parts to ensure everyone is moving in the same direction and with similar goals in mind. The goals should not be exactly the same but they should be meshed together.�
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Strategies Employed by Retailers and Suppliers
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Planning and Future Visioning
Investing for Mutual Success
Best-in-class companies allocate the appropriate resources against all areas of their business. Importantly, they ensure they have the online resources required to be successful in that space. They are strategic and forward-thinking. Companies that are successful in an omnichannel environment are able to connect the many pieces and form an omnichannel strategy and cohesive plan. They plan ahead and often involve their partners in the strategic process.
Best-in-class companies collaborate with their retailer or supplier partners to overcome the challenges experienced in an omnichannel environment. They recognize that investing with their partners and testing and learning together will advance them further than if they were to do it solo. They are willing to try new online marketing tactics like e-coupons, click-andcollect, email blasts and social media even if the current payout is suboptimal or unproven. They partner on initiatives and are willing to work together to co-create ‘’win-win� solutions. They are proactive by bringing opportunities and solutions to the table. Top suppliers support and participate in retailer programs and offer trade deals for retailers to pass on savings to consumers. Best-in-class retailers are willing to co-brand and co-market with suppliers on innovation and new opportunities.
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Best-in-class suppliers offer prices and trade deals that allow retailers to keep their pricing competitive. Best-in-class retailers are realistic with their margin expectations and continuously look for other ways to keep pricing competitive and accessible to shoppers.
Suppliers help their retailer partners by offering unique products and/or programs that are customized and tailored to meet their customers’ needs.
To compete and win in an omnichannel environment, differentiation is key. And best-in-class companies find ways to differentiate across multiple channels. Retailers that stand out to consumers find unique ways to resonate with their shoppers by providing service or value that differentiates them from others.
A US supplier states, “Best-in-class retailers have put a high emphasis on digital and are thinking long-term. They have made it part of their agenda in many ways, which challenges us. It forces us to step up our game to ensure we have the right insights and people and that we provide the right meetings and get our e-commerce team together. They are making it part of their strategic imperatives and are consistently talking about it.�
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Seamless Integration End to End Companies that are successful in an omnichannel environment are breaking down internal silos and integrating their business across all channel types to work as a whole. They are talking about in-store the same way they are talking about online. This enables them to have a consistent message about their stores or products across all channels. They are using all tools at their disposable to build a comprehensive marketing plan to reach consumers, no matter what channels they shop.
“Best-in-class suppliers are helping a lot in the [omnichannel] space. They have teams dedicated to helping us with digital marketing, our online platform and our brick-and-mortar stores. All of those people are run by one team lead. Then we have the resources, but the connectivity remains,� says a US retailer.
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Building and Sharing Knowledge Together Top companies listen to consumers, invest in data and insights, and stay on top of trends and consumer buying habits. Importantly they utilize social media and can speak effectively to millennials. Best-in-class companies share their knowledge with their retailer or supplier partners. Suppliers bring retailers market intelligence and competitor information that allows them to see what others are doing and what might work for them. Suppliers bring insights from the entire industry, looking outside their business and at non-competing suppliers. Retailers gather data on their consumers on how they shop and provide their supplier partners with access to that information. This allows retailers and suppliers to drill down into the data (often loyalty card data) and better understand their consumers’ demographics and buying habits.
Increasing Flexibility and Speed With the speed of change in this environment, the ability to be flexible and nimble sets best-inclass companies apart from and ahead of others. If something is not working, they can more easily make changes and shift things around quickly. They can make decisions more swiftly. Moving fast is more often associated with newer, small to medium-sized companies because the structure of larger, more traditional retailers and manufacturers often hinders their speed and agility.
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Focusing on the Shopper Experience Best-in-class companies provide an ideal shopping experience for consumers by providing what they want, when they want it, where they want it, and how they want it, all in an easy-to-shop environment. Top retailers provide the products their shoppers want by making product assortment choices that are right for their channels. Top suppliers help retailers select and optimize their product assortment. They bring them an assortment that is appropriate for each channel type that is targeted to consumers who shop there.
“Having the online experience and having the right choices of products is the thing folks are struggling with everywhere. Everybody wants more choice,” a US supplier comments. “Best-in-class retailers are making the right assortment choices and they reevaluate things in a new way. They make decisions about how many different brands they need in the same space.”
Top retailers make shopping easy for consumers. They ensure that the online shopping experience is simple for consumers to navigate, search and maneuver. Top suppliers help their retailer partners by keeping digital content up-to-date and accurate by constantly providing them with the most current product, package and pricing information. And, best-in-class companies invest in making the end-to-end process as efficient as possible so that consumers get the products they want when they want it. In stores, this means ensuring products are in stock and on shelf. Online, this means ensuring consumers get the products they order when they expect it, via “click and collect” or in-home delivery.
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In Conclusion Retailers and suppliers are experiencing many challenges in an omnichannel environment. In this ever-changing landscape, retailers and suppliers need each other to succeed. They must be willing to collaborate and share their knowledge. They should be open to including their partners in building an omnichannel strategy and in looking for opportunities that are mutually beneficial. They need to be flexible and they must be willing to take risks and to “test and learn” along with their partners. Importantly, they need to put consumers first and understand their evolving needs and changing shopping behaviors, in order to provide them with what they want, where they want it, when they want it, and how they want it. Collaborative supplier and retailer relationships are essential to win in today’s marketplace.
Advantage Group markets with E-Commerce in 2018: • Brazil • China
• France • Netherlands
• Turkey • UK
• USA
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